Compliance with international financial reporting standards (IFRS) and the value relevance of accounting information in emerging stock markets : evidence from Kuwait

Since the 1960s, the value relevance of accounting information has been an important topic in accounting research. The value relevance research provides evidence as to whether accounting numbers relate to corporate value in a predicted manner (Beaver, 2002). Such research is not only important for investors but also provides useful insights into accounting reporting effectiveness for standard setters and other users. Both the quality of accounting standards used and the effectiveness associated with implementing these standards are fundamental prerequisites for high value relevance (Hellstrom, 2006). However, while the literature comprehensively documents the value relevance of accounting information in developed markets, little attention has been given to emerging markets where the quality of accounting standards and their enforcement are questionable. Moreover, there is currently no known research that explores the association between level of compliance with International Financial Reporting Standards (IFRS) and the value relevance of accounting information. Motivated by the lack of research on the value relevance of accounting information in emerging markets and the unique institutional setting in Kuwait, this study has three objectives. First, it investigates the extent of compliance with IFRS with respect to firms listed on the Kuwait Stock Exchange (KSE). Second, it examines the value relevance of accounting information produced by KSE-listed firms over the 1995 to 2006 period. The third objective links the first two and explores the association between the level of compliance with IFRS and the value relevance of accounting information to market participants. Since it is among the first countries to adopt IFRS, Kuwait provides an ideal setting in which to explore these objectives. In addition, the Kuwaiti accounting environment provides an interesting regulatory context in which each KSE-listed firm is required to appoint at least two external auditors from separate auditing firms. Based on the research objectives, five research questions (RQs) are addressed. RQ1 and RQ2 aim to determine the extent to which KSE-listed firms comply with IFRS and factors contributing to variations in compliance levels. These factors include firm attributes (firm age, leverage, size, profitability, liquidity), the number of brand name (Big-4) auditing firms auditing a firm’s financial statements, and industry categorization. RQ3 and RQ4 address the value relevance of IFRS-based financial statements to investors. RQ5 addresses whether the level of compliance with IFRS contributes to the value relevance of accounting information provided to investors. Based on the potential improvement in value relevance from adopting and complying with IFRS, it is predicted that the higher the level of compliance with IFRS, the greater the value relevance of book values and earnings. The research design of the study consists of two parts. First, in accordance with prior disclosure research, the level of compliance with mandatory IFRS is examined using a disclosure index. Second, the value relevance of financial statement information, specifically, earnings and book value, is examined empirically using two valuation models: price and returns models. The combined empirical evidence that results from the application of both models provides comprehensive insights into value relevance of accounting information in an emerging market setting. Consistent with expectations, the results show the average level of compliance with IFRS mandatory disclosures for all KSE-listed firms in 2006 was 72.6 percent; thus, indicating KSE-listed firms generally did not fully comply with all requirements. Significant variations in the extent of compliance are observed among firms and across accounting standards. As predicted, older, highly leveraged, larger, and profitable KSE-listed firms are more likely to comply with IFRS required disclosures. Interestingly, significant differences in the level of compliance are observed across the three possible auditor combinations of two Big-4, two non-Big 4, and mixed audit firm types. The results for the price and returns models provide evidence that earnings and book values are significant factors in the valuation of KSE-listed firms during the 1995 to 2006 period. However, the results show that the value relevance of earnings and book values decreased significantly during that period, suggesting that investors rely less on financial statements, possibly due to the increase in the available non-financial statement sources. Notwithstanding this decline, a significant association is observed between the level of compliance with IFRS and the value relevance of earnings and book value to KSE investors. The findings make several important contributions. First, they raise concerns about the effectiveness of the regulatory body that oversees compliance with IFRS in Kuwait. Second, they challenge the effectiveness of the two-auditor requirement in promoting compliance with regulations as well as the associated cost-benefit of this requirement for firms. Third, they provide the first known empirical evidence linking the level of IFRS compliance with the value relevance of financial statement information. Finally, the findings are relevant for standard setters and for their current review of KSE regulations. In particular, they highlight the importance of establishing and maintaining adequate monitoring and enforcement mechanisms to ensure compliance with accounting standards. In addition, the finding that stricter compliance with IFRS improves the value relevance of accounting information highlights the importance of full compliance with IFRS and not just mere adoption.

Evaluating the effect of a patient education brochure on patients’ expectations and satisfaction with emergency department service

Introduction: The purpose of this study was to assess the capacity of a written intervention, in this case a patient information brochure, to improve patient satisfaction during an Emergency Department (ED) visit. For the purpose of measuring the effect of the intervention the ED journey was conceptualised as a series of distinct areas of service comprising waiting time, service by the triage nurse, care from doctors and nurses and information giving Background of study: Research into patient satisfaction has become a widespread activity endorsed by both governments and hospital administrations. The literature on ED patient satisfaction has consistently indicated three primary areas of patient dissatisfaction: waiting time, nursing care and communication. Recent developments in the literature on patient satisfaction studies however have highlighted the relationship between patients. expectations of a service encounter and their consequent assessment of the experience as dissatisfying or satisfying. Disconfirmation theory posits that the degree to which expectations are confirmed will affect subsequent levels of satisfaction. The conceptual framework utilised in this study is Coye.s (2004) model of disconfirmation. Coye while reiterating satisfaction is a consequence of the degree expectations are either confirmed or disconfirmed also posits that expectations can be modified by interventions. Coye.s work conceptualises these interventions as intra encounter experiences (cues) which function to adjust expectations. Coye suggests some cues are unintended and may have a negative impact which also reinforces the value of planned cues intended to meet or exceed consumer expectations. Consequently the brochure can be characterized as a potentially positive cue, encouraging the patient to understand processes and to orient them in what can be a confronting environment. Only a limited number of studies have examined the effect of written interventions within an ED. No studies could be located which have tested the effect of ED interventions using a conceptual framework which relates the effect of the degree to which expectations are confirmed or disconfirmed in terms of satisfaction with services. Method: Two studies were conducted. Study One used qualitative methods to explore patients. expectations of the ED from the perspective of both patients and health care professionals. Study One was used in part to direct the development of the intervention (brochure) in Study Two. The brochure was an intervention designed to modify patients. expectations thus increasing their satisfaction with the provision of ED service. As there was no existing tools to measure ED patients. expectations and satisfaction a new tool was also developed based on the findings and the literature of Study One. Study Two used a non-randomised, quasi-experimental approach using a non-equivalent post-test only comparison group design used to investigate the effect of the patient education brochure (Stommel and Wills, 2004). The brochure was disseminated to one of two study groups (the intervention group). The effect of the brochure was assessed by comparing the data obtained from both the intervention and control group. These two groups consisted of 150 participants each. It was expected that any differences in the relevant domains selected for examination would indicate the effect of the brochure both on expectation and potentially satisfaction. Results: Study One revealed several areas of common ground between patients and nurses in terms of relevant content for the written intervention, including the need for information on the triage system and waiting times. Areas of difference were also found with patients emphasizing communication issues, whereas focus group members expressed concern that patients were often unable to assimilate verbal information. The findings suggested the potential utility of written material to reinforce verbal communication particularly in terms of the triage process and other ED protocols. This material was synthesized within the final version of the written intervention. Overall the results of Study Two indicated no significant differences between the two groups. The intervention group did indicate a significant number of participants who viewed the brochure of having changed their expectations. The effect of the brochure may have been obscured by a lack of parity between the two groups as the control group presented with statistically significantly higher levels of acuity and experienced significantly shorter waiting times. In terms of disconfirmation theory this would suggest expectations that had been met or exceeded. The results confirmed the correlation of expectations with satisfaction. Several domains also indicated age as a significant predictor with older patients tending to score higher satisfaction results. Other significant predictors of satisfaction established were waiting time and care from nurses, reinforcing the combination of efficient service and positive interpersonal experiences as being valued by patients. Conclusions: Information presented in written form appears to benefit a significant number of ED users in terms of orientation and explaining systems and procedures. The degree to which these effects may interact with other dimensions of satisfaction however is likely to be limited. Waiting time and interpersonal behaviours from staff also provide influential cues in determining satisfaction. Written material is likely to be one element in a series of coordinated strategies to improve patient satisfaction during periods of peak demand.

Rethinking financial literacy in the aftermath of the Global Financial Crisis

Systemic risks and other factors that contributed to the global financial crisis have highlighted the need to reconsider the scope and nature of financial literacy initiatives and programs. In this article, we argue the case for rethinking financial literacy and the need for integrated solutions that explicitly incorporate solutions to behavioural shortcomings exhibited by individuals in their financial decision-making. While recognising the need to consider behavioural biases in individuals’ financial decisions, to date regulatory responses have largely ignored those biases in their proposed education and other strategies designed to address poor financial literacy and improve financial disclosure that, in turn, will improve financial decision-making.

A prioritised fuzzy constraint satisfaction approach to model agent negotiation for railway scheduling

With the recent regulatory reforms in a number of countries, railways resources are no longer managed by a single party but are distributed among different stakeholders. To facilitate the operation of train services, a train service provider (SP) has to negotiate with the infrastructure provider (IP) for a train schedule and the associated track access charge. This paper models the SP and IP as software agents and the negotiation as a prioritized fuzzy constraint satisfaction (PFCS) problem. Computer simulations have been conducted to demonstrate the effects on the train schedule when the SP has different optimization criteria. The results show that by assigning different priorities on the fuzzy constraints, agents can represent SPs with different operational objectives.

Client recommendations for financial incentives on construction projects

Purpose: To provide recommendations for construction clients who design and implement financial incentive mechanisms (FIMs) on projects. ---------- Methodology: Four large Australian building projects commissioned by government clients under managing contractor contracts and completed between 2001 and 2005 were examined to explore the ‘drivers’ that promoted motivation toward financial incentive goals. The results were triangulated across data sources, projects and stakeholder types. ---------- Findings: FIM design should incorporate: 1. flexibility to modify goals and measurement procedures over time, 2. multiple goals covering different project areas, 3. distribution of rewards across all the key organizations contributing to team performance (e.g. potentially not just the contractor, but the subcontractors and consultants) and a reward amount sufficient to be valued by potential recipients. FIM benefits are maximized through the following complementary procurement initiatives: 4. equitable contract risk allocation, 5. early contractor involvement in design, 6. value-driven tender selection, 7. relationship workshops, and 8. future work opportunities.---------- Research Limitations: This paper provides practical recommendations to industry and hence does not emphasize theoretical aspects.---------- Practical Implications: The uptake of these recommendations is likely to increase the impact of FIMs on motivation and improve project and industry outcomes. Although the study focuses on government clients of building projects, all the recommendations would seem to apply equally to private-sector clients and to non-building projects.---------- Originality: In order to improve motivation and reward high performance, clients are increasingly using FIM in their construction contracts. Despite the rising use of financial incentives, there is a lack of comprehensive construction-specific knowledge available to help clients maximize outcomes. The study addresses this gap in the literature.

Motivation toward financial incentive goals on construction projects

Construction industry observers tout the use of financial incentives as promoters of motivation and commitment on projects. Yet, little empirical evidence exists concerning their effectiveness. What are the drivers of motivation on construction projects? The reasons that construction project participants are motivated to pursue voluntary incentive goals are examined through four Australian case studies. The results demonstrate the critical role played by project relationships and equitable contract conditions in promoting the effectiveness of financial incentives. In the context of a construction project, this study finds financial incentives to be less important to motivation and performance than relationship enhancement initiatives. This finding is unexpected and has implications for the design of project procurement strategies. These results suggest if project clients ignore the importance of relationship quality between participants, the impact of any financial incentive will be compromised.

Sustainability performance of construction : conceptual models of satisfaction levels in construction projects

In general, the performance of construction projects, including their sustainability performance, does not meet optimal expectations. One aspect of this is the performance of the participants who are independent and make a significance impact on overall project outcomes. Of these participants, the client is traditionally the owner of the project, the architect or engineer is engaged as the lead designer and a contractor is selected to construct the facilities. Generally, the performance of the participants is gauged by considering three main factors, namely, time, cost and quality. As the level of satisfaction is a subjective issue, it is rarely used in the performance evaluation of construction work. Recently, various approaches to the measurement of satisfaction have been made in an attempt to determine the performance of construction project outcomes - for instance, client satisfaction, customer satisfaction, contractor satisfaction, occupant satisfaction and home buyer satisfaction. These not only identify the performance of the construction project but are also used to improve and maintain relationships. In addition, these assessments are necessary for the continuous improvement and enhanced cooperation of participants. The measurement of satisfaction levels primarily involves expectations and perceptions. An expectation can be regarded as a comparative standard of different needs, motives and beliefs, while a perception is a subjective interpretation that is influenced by moods, experiences and values. This suggests that the disparity between perceptions and expectations may possibly be used to represent different levels of satisfaction. However, this concept is rather new and in need of further investigation. This chapter examines the methods commonly practised in measuring satisfaction levels today and the advantages of promoting these methods. The results provide a preliminary review of the advantages of satisfaction measurement in the construction industry and recommendations are made concerning the most appropriate methods to use in identifying the performance of project outcomes.